Every business needs a plan, but not all businesses know how to plan. Companies that have a solid grasp on the strategic planning process are ones that understand that separate plans on their own, without one all-encompassing goal, never works.
This is why some companies go day-to-day putting out one fire after another, while others chart their own path to success by following a set of predetermined goals and objectives.
Strategic planning is never simply about making a declaration that a business needs to grow. It is never just a one-line statement. Instead, it's a continuous process, one where a company defines its ultimate goal, outlines the individual objectives to attaining that goal and then adopts separate strategies to achieve those objectives.
The entire process involves setting the stage for business growth by laying the groundwork for the company’s future. It involves objectives broken down into separate plans and strategies that call upon a company’s best resources.
To help make this a much simpler process, we'll outline five critical steps to putting your company's all-encompassing plan together. Again, this isn't a one-time event. It's never stationary. Instead, it's a continuous process and one where you must assess your company's progress at various intervals. So, does your business need a strategic plan? More importantly, do you know how to put that plan together?
Everything starts from your mission statement. This first step of your strategic plan will lay the groundwork for future action plans and initiatives. In essence, an argument can be made that the mission statement fills the role of your "ultimate goal". It is your company's very own reason for being.
Your statement is a declaration by your company to its employees, the market it services, its investors, and its customers, about where your company is headed, and how it intends to get there. Here is an example of what a mission statement might look like.
“Inview Designs ultimate purpose is to become the preeminent designer and manufacturer of point-to-point communication systems servicing the satellite and wireless industries. Our manufacturing excellence, coupled with our engineering expertise, will help position Inview Designs as a dominant market player”.
This statement is as important to a company’s customers and its vendors as it is to its employees. Make sure the statement is clear in its intention and that it defines the ultimate purpose of your company. It must deliver a concise message to its market, your customers and your company's employees.
2. Companywide Core Values
Core values are a set of companywide principles that define how the company will operate in a given market or industry. It is essentially a declaration of how that business will interact with its customers, its employees and its investors. It states a set of norms and reasonable expectations on how the company will conduct itself during its business dealings.
Your company's list of core values must be truly representative of how you feel you'll be able to bring value to your market and stakeholders. This is a list that is made readily available for anyone and everyone to see. Here is an example of what a list might include.
Aside from this list, you should also go through the exercise of defining your company's value assertion. The best way to define your company's assertion is by performing a value-chain analysis - like the one described in the video below. The analysis will force you to define your company's internal and external business strengths and the role both play in the value your company brings to its market and customers. The analysis forces you to identify strengths you may, or may not, have been aware of.
The Value-Chain Analysis: Defining Internal and External Business Strengths
A value-chain analysis is a simple tool your team can use to define your company's value assertion and value proposition in business development. You can read more by going to: Your Value Chain Defines Your Value Assertion: B2B Marketing Essentials
3. Objectives That Lead to Growth
This is where your company will lay out its objectives and determine their length. Again, these objectives are linked to the company's overall goal of becoming "the preeminent designer and manufacturer of point-to-point communication systems." For instance, an objective might be that the company wants to grow to $10 million in 5 years. In this case, the company sees the growth to $10 million as critical to financing its development of future product lines. So, how will it get there and what will be measured along the way?
First, the company would break this 5 year objective into yearly, quarterly and monthly objectives, each with the ultimate goal of achieving the $10 million objective. Each month, quarter and end of year, will become the company’s benchmarks or periods of review, where the company will decide if it’s on track to meet the objectives, or if it needs to change course.
Not all objectives are growth-oriented, but all should be focused on facilitating growth. For instance, an objective may be to reduce expenditures by 10% in a given period. Reducing expenses will help the company grow by helping it become more competitive. However, cost reduction itself won't grow the company - the savings and increased profit will make growth easier.
In our example, if a company had this $10 million dollar objective, they might then determine that their yearly objective is to grow 20%, and their quarterly objective to grow 5%. In addition, they may determine that in order to meet this objective, they must increase their gross profit on key products by 5%, and increase their market share by 6% a year and reduce operating costs by 3% year-over-year. Each of these milestones would be reviewed and assessed.
Company Objective: "Inview Design's goal is to grow revenue to $10 million in five years."
4. Strategies and Action Plans to Achieve Objectives
The company now has its overall objective, and must determine its strategies and action plans to accomplish this objective. In working on strategies, think of how to reduce costs, improve gross profit, and reach this $10 million objective. In reducing costs, will lower freight costs and lower prices from suppliers help? Of course it will. What if the company reduced the number of vendors it bought from and increased its purchasing power and volumes to negotiate better pricing? Would this work? It would, and it would also help lower the freight costs of those incoming parts as well, as the vendor would be shipping more from one location, and this would allow the company to work towards lower freight.
Now move onto gross profit and increased sales strategies. However, go outside the box and think of alternative revenue streams. Here is a summary of some of the strategies this company might employ to reach its desired $10 million dollar revenue goal.
The SWOT and TOWS analyses are simple strategic planning tools that help companies identify issues and put plans together to remove them as going concerns. SWOT is more of a brainstorming tool, while TOWS allows you to move issues of concern into definitive action plans. To read more about these two planning tools, please go to: Strategic Business Planning: SWOT & TOWS Analysis
5. Allocate Resources to Strategies and Action Plans
Your company now has its strategies and action plans. Now, you must link your company’s resources and abilities to these strategies and plans. Who will be in charge of lowering the company's inventory costs? Will all of sales be responsible to pursuing prepaid customers, or will only a select few be tasked with that responsibility? What design and engineering resources can the company use to increase its product development initiatives? Does this involve hiring more engineers, or changing the responsibilities?
Granted, answering these aforementioned questions is a rather involved process. However, it's really about allocating internal resources in order to attain your company's objectives. In this case, the company needs to call upon multiple internal departments in order to attain its $10 million dollar objective. It requires the input of procurement, sales, marketing, engineering, accounting, finance, customer service, senior management and inventory management. In essence, everyone is part of the company's pursuit of its $10 million dollar objective.
Strategic planning requires a framework that will encourage additional plans, and the adoption of specific strategies to see those plans to their successful conclusion. Tie in your company’s resources and abilities, and make it clear who is responsible for what, and when results are expected. Include benchmarks and timetables where results will be reviewed and progress assessed.
Most companies that excel in strategic planning make it a point to periodically review their plan. This could be done on a quarterly basis, semi-annual or annual basis. However, the impetus is on businesses to review their plan and ensure they're making adjustments if needed. Again, the planning process is never stationary - it is always evolving.
Read more about strategic planning.